Questions and Answers
This week I answer five questions that I have been asked over the last month or two. Perhaps one of these questions is something you've wondered about as well.
1. When do you think electric cars will become more popular than gas cars?
I think it's going to take some time. The key issue is infrastructure is currently not in place to sufficiently provide charging capabilities to large numbers of cars. Tesla has done a good job of building out its infrastructure, but other car makers are lagging behind. Additionally, the cost of batteries needs to continue to drop in order for the electric alternative to be cost competitive to gas cars; but that day is coming in the next few years. The world will eventually head towards electric cars and companies will likely transition their delivery fleet to electric vehicles.
2. Why are gas prices going up?
You may have read about a recent cyber-attack on a facility on the East Coast by a Russian cyber terrorism organization. This has crippled deliveries and has caused gas prices to rise across the country. Additionally, gas prices normally rise come summertime and, given everyone's desire to get out of the house, I expect gas prices to be under pressure. I don't expect this to be a long-term situation.
3. Technology stocks seem to be dropping; why is that?
Technology stocks often times fall in response to rapid rises in share prices. That certainly has been the case over the last 6 to 12 months for many technology stocks so a correction is far overdue. Additionally, the technology sector is perceived to be interest rate sensitive and that is another reason why stocks have sold off in the technology sector. We still believe long-term technology is an important part of an equity portfolio as is a growth driver going forward for economies.
4. I understand the unemployment rate is still high, but I hear companies can’t find workers? That seems kind of like a conflict to me.
I suppose it depends on what type of employees you're looking for. Those that are in highly skilled labor sectors remain in heavy demand. Also, companies seeking to hire employees at lower wage rates (like restaurant workers) are having a hard time finding enough people. This will likely cripple the reopening trade for some industries. What we are seeing right now is a transition from higher unemployment to more full employment which will take about six months to work out. I wouldn’t read too much into the short-term numbers.
5. When is the infrastructure plan going to pass, how big will it be, who will win the fight for the shape of the package (Democrats or Republicans), etc.?
I expect the infrastructure plan to pass somewhere around July. I don't have any idea how big it will be nor do I know who will win the debate to shape the legislation. What I do know is that the package will likely include tax increases and that is something we're watching very carefully as we manage portfolios. It's also something to keep in mind when you talk to your DWM advisor. They can discuss with you the ramifications of any passed legislation.